Narvasa v. U.S. Bancorp

          ORDER

         Like many Americans facing foreclosure in the aftermath of the 2008 mortgage crisis, Ms. Fernani Narvasa sought to revisit and modify the terms of the mortgage she had on her California home. When U.S. Bancorp (Bancorp), a national bank, denied her request to modify, she sought a statement of the bank’s net present value (NPV) calculation with respect to her home, a tool used to assess the soundness of economic investments. Bancorp refused to supply Ms. Narvasa with this statement, saying it never provides such information. In response, Ms. Narvasa filed suit in this court, alleging Bancorp’s refusal to provide an NPV calculation statement violated various state laws. Compl., ECF No. 1. Bancorp disagrees and moves to dismiss Ms. Narvasa’s complaint. Mot., ECF No. 7.

         At hearing on Bancorp’s motion on February 29, 2016, Arasto Farsad appeared for Ms. Narvasa and Robert McWhorter appeared for Bancorp. ECF No. 11. As discussed below, Bancorp’s motion is GRANTED, without leave to amend. Ms. Narvasa is ordered to show cause why her third claim for breach of the implied covenant of good faith and fair dealing should not also be dismissed.

         I. PROCEDURAL HISTORY AND FACTUAL BACKGROUND

         On November 14, 2015, Ms. Narvasa filed suit in this court, asserting the following claims: (1) violation of California Civil Code § 2923.6(f)(3); (2) violation of California Civil Code § 2923.7(b); (3) breach of the implied covenant of good faith and fair dealing; (4) violation of California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200, et seq.; and (5) negligence. See generally Compl. Ms. Narvasa’s first two claims are based on California’s Homeowner Bill of Rights (HBOR), a statute that provides borrowers with a private right of action to challenge certain material violations of HBOR. Penermon v. Wells Fargo Bank, N.A., 47 F.Supp.3d 982, 993 n.2 (N.D. Cal. 2014).

         Bancorp filed the pending motion to dismiss the complaint on January 19, 2016. Ms. Narvasa filed an opposition on February 8, Opp’n, ECF No. 8, and Bancorp replied on February 18, Reply, ECF No. 9.

         Ms. Narvasa’s claims arise from the following allegations, and from documents attached to the complaint and incorporated by reference. See Fed. R. Civ. P. 10(c); Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1160 (9th Cir. 2012). Ms. Narvasa and her husband have lived in Elk Grove, California since March 20, 2001. Compl. ¶ 8. Ms. Narvasa holds a primary mortgage loan on her residence “currently serviced by” Bancorp. Compl. at 2.

         On September 3, 2015, Ms. Narvasa submitted a completed loan modification application to Bancorp. Id. ¶ 9. On October 15, 2015, Bancorp sent Ms. Narvasa a formal letter, dated October 5, denying her application. Id. ¶ 11. In the letter, Bancorp explained it explored fifteen different “loss mitigation programs, ” but could not approve Ms. Narvasa’s application by offering her any one of them. Compl. Ex. 1, ECF No. 1. Bancorp based its determination on “the information [Ms. Narvasa] provided” and “applicable investor guidelines” for each loss mitigation program. Id. The guidelines for each program were not provided in the denial letter. See id.

         Ms. Narvasa alleges Bancorp’s denial was based on an “NPV failure.” Compl. ¶ 11. On October 26, 2015, through her counsel, she contacted Bancorp to discuss the denial letter and to request a copy of the NPV calculations used to assess her application. Id. ¶ 12. Bancorp refused to provide a copy, stating it “did not need to provide any of the NPV calculations used, ” id., and that it “never provide[s] such information, ” id.

         II. LEGAL STANDARDS

         A party may move to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The motion may be granted only if the complaint lacks a “cognizable legal theory” or if its factual allegations do not support a cognizable legal theory. Hartmann v. Cal. Dep’t of Corr. & Rehab., 707 F.3d 1114, 1122 (9th Cir. 2013). The court assumes these factual allegations are true and draws reasonable inferences from them. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         A complaint need contain only a “short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), not “detailed factual allegations, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). But this rule demands more than unadorned accusations; “sufficient factual matter” must make the claim at least plausible. Iqbal, 556 U.S. at 678. In the same vein, conclusory or formulaic recitations of a cause’s elements do not alone suffice. Id. (quoting Twombly, 550 U.S. at 555). Evaluation under Rule 12(b)(6) is a context-specific task drawing on “judicial experience and common sense.” Id. at 679.

         In ruling on a motion to dismiss, the court is not limited by the plaintiff’s allegations if the complaint, as here, is accompanied by attached documents. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). Such documents become a part of the complaint and may be considered in considering the defendant’s motion to dismiss. Id.

         III. DISCUSSION

         Bancorp seeks to dismiss Ms. Narvasa’s complaint, contending several of her claims are preempted and, alternatively, her claims lack merit. Mot. at 10-25. Ms. Narvasa contends her claims are not preempted and they otherwise have merit. Opp’n at 10-25. The court first addresses preemption, which is dispositive.

         A. Federal Preemption

         Bancorp contends four of Ms. Narvasa’s claims are preempted by either the federal National Bank Act (NBA), 12 U.S.C. § 24, or the Home Owners’ Loan Act (HOLA), 12 U.S.C. §§ 1461 et seq. The four claims, identified by number assigned in the complaint, are those based on (1) section 2923.6(f)(3); (2) section 2923.7(b); (4) the California UCL; and (5) negligence. Mot. at 10. Defendants do not contend Ms. Narvasa’s third claim, breach of the implied covenant of good faith and fair dealing, is preempted. See generally Id. Ms. Narvasa contends none of her claims are preempted. Opp’n at 10. The court first briefly reviews conflict preemption and field preemption, the two types of implied preemption implicated by the NBA and HOLA, respectively, and then proceeds to a preemption analysis.

         1. Conflict Preemption ...